Making Sense

HSBC Flash India PMI Report Output Growth : India's private sector output growth increased in June, recovering from a slowdown in May. Both manufacturing and services sectors saw quicker rates of expansion. HSBC Flash India Composite Output Index : The index rose from 60.5 in May to 60.9 in June, indicating a substantial and historically significant expansion. This is aligned with the average growth rate over the past 12 months. Manufacturing Sector : The Manufacturing PMI rose from 57.5 in May to 58.5 in June, driven by stronger new orders, output, employment, supplier delivery times, and stocks of purchases. All five sub-components of the index contributed to this improvement. New Orders and Exports : Total new orders rose sharply, surpassing May's growth. Export orders increased for the 22nd consecutive month, with June's growth being the second-fastest since September 2014, despite a slight deceleration compared to May. Employment : Employment saw a substantial increase...

India's manufacturing sector, as per the HSBC India Manufacturing PMI®, soared to a 16-year high of 59.1 in March, reflecting robust expansion. Notably, new orders and output surged , with growth across consumer, intermediate, and investment goods sectors. Input purchases rose significantly, indicating preparations for future sales uptick. Despite increased costs for materials like cotton and steel, output charge inflation softened. The outlook remains optimistic, with 28% of firms forecasting growth. The data suggests strong momentum in manufacturing, underpinning a positive economic outlook, contingent on managing cost pressures and sustaining growth. India's Services PMI for March 2024 surged to 61.2, indicating robust expansion in the service sector , with the Business Activity Index marking one of the strongest growth rates in over 13-and-a-half years. New order intakes soared, with a notable uptick in new export business, expanding at the fastest rate since Septemb...

System liquidity steadily improved as Government Spending kicked in and liquidity deficit improved to Inr 40K crore on Mar 1 from 251K cr on 21 Feb. The WACR as on Mar 1 was at 6.47%.  Results for the VRRR (Variable Rate Reverse Repo Operation) auction for Inr 75K crores saw offers for Inr 18K crs at a cut off rate of 6.49%.  Advance Tax payment by Mar 15 followed by GST payments by Mar 20 will see liquidity worsen over the month. I am estimating advance tax payments at inr 200K crore. There is also a S/B swap auctioned on 08 Mar 2022 with a maturity date of 11 Mar 2024 of $ 5 bn which is set to mature and if RBI takes delivery of the same it would release 42K cr of INR liquidity into the system. Swap points for March are trading soft at 0.86% as market participants prefer to keep received positions in case of USD liquidity tightness. 

On INR, liquidity has been progressively easing to a deficit of 100K crore. RBI today announced a second VRRR of Inr 50K crore as overnight rates drop towards the lower end of the interest rate corridor. Weighted Average Overnight Call rates were seen at 6.35% yesterday. RBI will announce the monetary policy decision tomorrow. More to follow on the next posting on India Rate Outlook.  I posted the below chart post the NFP release and US yields were seen pulling back on a solid $54 bn 3Y Auction. The next auction is scheduled for Wednesday $42 bn in 10Y and $ 25 bn in 30Y. Risk sentiment stabilized and USD index pulled back from 104.60 highs. No other data of note today. On Friday, we have the U.S CPI revisions followed by CPI release next week.  The NY Community Bancorp continued to fall , down 60% since Jan 30 and the KBW Regional Bank Index down 12% since Jan 30.  Fed's Mester comments reiterated the post FOMC narrative. She stated that " If the economy evolves as expec...

Overnight, US2s10s saw 6 bps of flattening as US Consumer Confidence and JOLTS data surprised on the upside. The Consumer Confidence increased to levels not seen since end of 2021 and the JOLTS Job openings data showed openings at 9.026 mn with vacancy rate at 5.30%. All eyes today will be on the FOMC Rate Decision and Powell's press conference.  Yields High Low Close DoD ▲ US 2Y          4.39          4.30          4.34                 1.70 US10Y          4.10          4.03          4.03      ...

"An investor needs to do very few things right as long as he avoids big mistakes" I was facing some technical issue and hence the crazy delay in publishing the post.  On the Domestic side, Bloomberg Index Services proposed to include India FAR bonds in its EM local currency index over a 5 month period starting Sep 24 and invited feedback on the same. The inclusion could result in $2 - $3 bn of inflows acc to media reports. System Liquidity continued to be in deficit at inr 155k crs and WACR was at 6.77%. Forwards continued to be paid with Dec Swap points closing 2 bps higher on the day. Mifor curve was 2 - 3 bps lower with volumes of inr 4830 crs across 40 trades. OIS was 4 - 5 bps lower in the 2Y-5Y segment.  Bitcoin and Crude Oil prices were large movers yesterday. Bitcoin surged ~ 7% in anticipation of SEC Bitcoin ETF Approval decisively breaking above the 44750 level. Crude Oil prices however slumped over 3%. Saudi Arabia cut the official selling prices (OSPs) for its cru...